Production Jars of sauce 20000 Ingredient cost variable 160

Production - Jars of sauce

20,000

Ingredient cost (variable)

$16,000

Labor cost (variable)

9,000

Rent (fixed)

4,000

Depreciation (fixed)

6,000

Other (fixed)

1,000

Total

$36,000

Using this information, prepare a budget for May stating the total amount for the May budget. Assume the budget will increase to 26,000 jars of sauce reflecting anticipated sales increase related to a new marketing campaign

Production - Jars of sauce	20,000
Ingredient cost (variable)	$16,000
Labor cost (variable)	9,000
Rent (fixed)	4,000
Depreciation (fixed)	6,000
Other (fixed)	1,000
Total	$36,000

Solution

Particulars

Base

Per Unit Cost

May Budget Cost

Production - Jars of sauce

20,000

26,000

Ingredient cost (variable)

$16,000

=16000/20000= $0.8

$20,800

Labor cost (variable)

$9,000

=9000/20000= $0.45

$11,700

Rent (fixed)

$4,000

Not applicable

$4,000

Depreciation (fixed)

$6,000

Not applicable

$6,000

Other (fixed)

$1,000

Not applicable

$1,000

Total

$36,000

Total

$69,500

Fixed will not change because it doesn’t get impacted with increase in units of production

New Ingredient cost = $0.8 x 26000 = $20800

New Labor Cost = $0.45 x 26000 = $11700

Particulars	Base	Per Unit Cost	May Budget Cost
Production - Jars of sauce	20,000		26,000
Ingredient cost (variable)	$16,000	=16000/20000= $0.8	$20,800
Labor cost (variable)	$9,000	=9000/20000= $0.45	$11,700
Rent (fixed)	$4,000	Not applicable	$4,000
Depreciation (fixed)	$6,000	Not applicable	$6,000
Other (fixed)	$1,000	Not applicable	$1,000
Total	$36,000	Total	$69,500